Why New Zealanders earn almost nothing on $120 billion in savings
New Zealanders hold nearly $120 billion in news accounts, yet many earn almost no interest on their deposits. Research from the Financial Markets Authority reveals that most savers prioritise high interest rates when choosing an account. However, some major banks still offer rates as low as 0.05%, raising questions about the value for customers.
The average interest rate for unconditional news accounts in New Zealand sits just above 1%. But several well-known accounts fall far below this mark. ASB's Savings On Call pays 0.1%, while Co-Operative's Smile On Call offers the same rate—though only on balances over $4000. ANZ's Select account matches this 0.1% threshold, but only for amounts exceeding $5000, alongside a $6 monthly fee that can be waived under certain conditions. Westpac's Simple Saver also pays just 0.05%, though it includes 'nudge' emails encouraging customers to maintain higher balances.
For older savers aged 65 to 74, stability and easy access often matter as much as the interest rate itself. Yet even these customers face limited returns. Industry experts, including Squirrel chief executive David Cunningham, note that low rates provide banks with a steady income stream at the expense of savers. The situation mirrors trends overseas. In Germany, for example, Sparkassen and Volksbanken offer some of the least generous rates, with 36% of 823 evaluated institutions paying just 0 to 0.25%. Their average rates are more than three times lower than those of national banks, and standard rates after promotional periods often drop to around 1.3%—still higher than many New Zealand options.
With billions parked in low-yield accounts, New Zealand savers face a tough choice between convenience and better returns. While some banks provide slightly higher rates, the majority stick to minimal payouts. The gap between customer expectations and actual earnings remains wide, leaving many to weigh whether loyalty to a bank outweighs the benefits of shopping around.
